The Affordable Care Act (ACA) permits two or more states to work together to create a multi-state health insurance exchange. This brief written by the Urban Institute’s Linda Blumberg examines why states might form multi-state exchanges and the issues raised by doing so.
Blumberg offers four rationales for establishing multi-state exchanges:
- Administrative economies of scale could be significant.
- Regional exchanges might make sense in large metropolitan areas that cross state boundaries.
- Multi-state exchanges could promote pooling across state lines.
- Multi-state exchanges could create the critical mass of insured persons to stabilize risk pools in low-population states.
Blumberg concludes that because cross-state risk-sharing could lead to one state’s population effectively subsidizing another state’s population, multi-state exchanges are likely to focus on shared administrative structures and efficiencies as opposed to risk-sharing.